China Social Science Review

No.3, 2021

 

Why Some Social Policies Are Ineffectual: Research Based on Rural Agricultural Loans in a Pilot Area

(Abstract)

 

Zhang Jing

 

Research in one local pilot area found that the unsatisfactory implementation of financial policies aimed at benefiting the farmers stems from a series of institutional barriers. Specifically, these are: the cooperative finance has high institutional costs and few competitive advantages; it is difficult for farmers to trade housing and land assets, and they have little real loan collateral they can actually use; collateral in the form of interpersonal guarantees runs counter to social ethics; and access to loans based on personal credit depends on a comprehensive information system. The systemic effect of these institutional conditions has “incentivized” risk-averse responses, resulting in a situation where banks are afraid to lend money and farmers have trouble borrowing money. We are faced with a choice of action between letting a sound policy be ineffective or improving the system to increase the consistency of incentives, reduce the cost of activity in the agricultural industry and make financial policies targeting the farmers play their due role.